WTO and Market Access: False Hope?

Sta. Ana is the Coordinator of Action for Economic Reforms. This article was published in the Opinion Section, Yellow Pad Column of BusinessWorld, December 5, 2005 edition, page S1/5.

The Hong Kong ministerial meeting of the World Trade Organization (WTO) has become the focus of the attention of the global policy elite. Leaders and spokespersons of multilateral institutions, rich and poor nations, non-governmental organizations, and the media have all said their piece

The developing countries want the richest countries to reduce farm subsidies and ease the barriers to the entry of agricultural goods. This is only natural, given that the comparative advantage of poor countries lies in agriculture goods. But the rich countries are only willing to give paltry concessions. At the same time, they demand that the developing countries further liberalize trade in services and in industrial goods and to rigorously adhere to intellectual property rights.

Neither side will budge. Still, WTO member-countries want to keep the multilateral system in place—almost everybody cites the cliché that a multilateral system is superior to bilateral negotiations. But in the end, what motivates member-countries is their national interest, even if that means sacrificing the global interest. The concept of free trade, in which everyone chalks up welfare gains, is neat and elegant only in textbooks.

The WTO is no stranger to acute crises. Recall the turmoil in the Seattle talks and the collapse of the Cancun negotiations. In Doha, the member-countries had to hammer out a compromise to salvage the WTO. That compromise in Doha was for the United States, Europe, and Japan to bring down agriculture subsidies and for the developing countries to open up their markets to high-value services and industrial goods. It is far less controversial to agree to the basic principles. The harder part is threshing out the modalities.

The buzzword in previous talks and in the current round has always been market access for developing countries. International NGOs known for progressive advocacy like Oxfam have unfailingly echoed this buzzword.

But is the demand for market access really a cutting-edge position for progressive advocacy? Can the position of Paul Wolfowitz—the rabid neo-conservative who has become the World Bank president,—be a barometer of what is supposed to be progressive? Lo and behold, in an article published by the Financial Times in October 2005, Mr. Wolfowitz appealed to rich countries to abandon farm subsidies and give market access to developing countries. In
addition, The New York Times (NYT)—a voice of erudition for globalization and liberalization—has spoken on behalf of the poor countries. To quote its November 11, 2005 editorial:

“For Mr. [Celso] Amorim [Brazil’s foreign minister], and the other negotiators from developing countries that have been run over by the rich world in trade talks for the past 50 years, this page has two words: Stand fast. Do not give a single additional concession until the European Union cuts its farm subsidies.” The NYT editorial concludes with a line that could well serve Walden Bello’s cause: “If the European Union is truly going to refuse to make right
a half-century of trade-distorting subsidies, …then there’s an easy answer: the talks should just not move.”

Market access has drawn together strange bedfellows—Oxfam, Wolfowitz and the World Bank, The New York Times, etc. Surely, gaining market access for developing countries is a worthy objective. Mr. Bello’s objection is the quid pro quo. That is, agriculture goods of poor countries gain access to the markets of rich countries but in turn, the poor countries have to open up their economies to the higher value-added goods and services emanating from
the rich countries.

The main question though is: How decisive is market access for a developing country’s growth and development? Is market access a determinant of long-term growth? If the world were simple—assume a two-country model—the positive outcome of market access for the poorer country is clear-cut. In the real, complicated world where different countries possessing similar comparative advantage compete with one another, the distributional gains have to be sorted out. Big food-exporting countries like Brazil and India as well as Australia and New Zealand are clear winners.

But for the Philippines, market access on the whole is not a fundamental issue. In the first place, the Philippines is a net importer of agricultural goods.

And why the sole emphasis on trade in goods? Theory suggests that the Philippines and other developing countries have much more to gain from labor mobility than from the freer flow of tradable goods.

What is lost in the intense debate on market access and other WTO issues is the most important lesson drawn from the success stories of developing countries. Dani Rodrik says it quite simply: “Countries that have done well in the recent past have done so through their own efforts. Aid and market access have rarely played a critical role.”

We need not look far to illustrate this lesson. Take Vietnam, our neighbor. It suffered from a trade embargo imposed by the United States. Additionally, its trade policy has been marked by “distortions” such as high tariffs, quantitative restrictions, and state credit. More to the point, it is not yet a member of the WTO. Still, during that painful period that the United States shut off of trade, investments and development assistance to Vietnam, Vietnam’s per capita growth averaged 5.6 percent, outperforming Mexico, for example, which enjoys free and market access to the United States.

This is not to ignore the role of external actors. Yes, developing countries need global rules that allow national institutions and policies to be responsive to development.

And it is in this frame that we contextualize the WTO debate. By all means, support the call for market access to the rich countries. But we need not overvalue or oversell the issue. For progressive NGOs (several hundreds of Philippine NGO representatives will invade the Hong Kong WTO meeting), it is also worth pondering the appropriate strategy in the face of scarce resources. They may be better off concentrating their efforts on the fight against the Arroyo regime and vested interests, for these are the main threats to the country’s long-term growth.